LYNCHBURG Va. The U.S. jobless rate is likely giving an accurate read on the amount of slack in the labor market, with an unusually high level of long-term unemployment reflecting those who lack skills needed to find work, a top Federal Reserve official said on Thursday.
Richmond Federal Reserve Bank President Jeffrey Lacker told a group of local business leaders a drop in labor force participation and historically high long-term unemployment largely reflected structural trends that monetary policy cannot offset.
"The unusually large rise in long-term unemployment suggests that it was caused by an increase in the number of unemployed workers who were inherently less likely to exit unemployment," Lacker said, citing research by a Richmond Fed economist.
Lacker's view contrasts with that of Fed Chair Janet Yellen, who has stood by her belief that a core group of the long-term unemployed will return to the job market as the economy recovers, placing downward pressure on wages.
That pressure is what supports Yellen's view of continuing to provide an extraordinary amount of accommodative monetary policy to stoke the economic recovery and to push inflation to the Fed's 2 percent target.
Lacker, who will be a voting member of the Fed's policy-making committee next year, is more hawkish, advocating for a quicker pullback from monetary policy accommodation, and a faster lift-off of interest rates.
He said evidence from employers in the area covered by the Richmond Fed show that they were unable to find workers with the necessary skills, despite a large pool of unemployed workers.
Holding to the view that the long-term unemployed are unlikely to return to the work force, Lacker focused his remarks on workforce education and on-the-job training.
(Reporting by Michael Flaherty; Editing by Paul Simao)